A bitterly divided Federal Communications Commission approved sweeping net-neutrality regulations Thursday that will fundamentally transform the U.S. government's power over Internet access.

The new regulations deliver a thrilling victory to Internet activists and tech start-ups, who waged a fierce yearlong campaign to ensure that all Internet traffic is treated equally. It's a stinging defeat for cable and telecom giants like Comcast, Verizon, and AT&T—traditionally some of the most powerful lobbying forces in Washington.

The FCC's new rules largely track a proposal from President Obama and will bar Internet providers from blocking websites, selectively slowing down any content, or creating any special "fast lanes" for sites that pay more.

The goal of net neutrality is to prevent Internet providers from acting as "gatekeepers" and controlling what online content people can access. Enforcing net neutrality was a campaign promise from Obama in 2008, and last November, he injected himself into the FCC debate by calling for the agency to issue the "strongest possible" rules.

"The action we take today is an irrefutable reflection of the principle that no one—government or corporate—should control the free and open access to the Internet," Wheeler said to cheers from the crowd of activists who packed the FCC's meeting room.

Crucially, the rules classify the Internet as a "telecommunications service" under Title II of the Communications Act. Net-neutrality advocates and Obama argued that the move was the only way the FCC could enact regulations that could hold up in court. The rules apply to Internet connections both at home and on smartphones.

The cable and telecom companies fear that the FCC has essentially turned them into public utilities, potentially opening the door to an avalanche of new regulations that have little to do with protecting an open Internet. The new burdensome regime will discourage investment and mean slower speeds and higher prices for everyone, they claim.

Wheeler initially favored rules that would not have invoked Title II, but he backtracked in the face of a massive public backlash and Obama's intervention. More than 4 million people filed outraged comments with the FCC, the most for any proceeding ever.

The two Republicans on the five-member FCC, Ajit Pai and Michael O'Rielly, issued lengthy and passionate dissents, warning that the agency was delivering a severe blow to online freedom.

"The Internet has become a powerful force for freedom, both at home and abroad," Pai said. "So it is sad this morning to witness the FCC's unprecedented attempt to replace that freedom with government control."

O'Rielly claimed that the Democratic commissioners were attempting to "usurp the authority of Congress by rewriting the Communications Act to suit [their] own values and political ends."

Wheeler fired back: "This is no more a plan to regulate the Internet than the First Amendment is a plan to regulate first speech."

The Democratic commissioners rallied to the chairman's side. Commissioner Mignon Clyburn compared the FCC's action to the writing of the Bill of Rights, while Commissioner Jessica Rosenworcel argued that the agency has a "duty to protect what has made the Internet the most dynamic platform for free speech ever invented."

The major Internet providers are expected to sue to overturn the new regulations. And Republicans in Congress are working on their own counterpart legislation that would enforce net-neutrality protections without classifying the Internet as a "telecommunications service." Democrats have so far refused to negotiate, preferring to wait for the FCC to take action first.

The FCC has long used Title II, which was first enacted in 1934, to regulate phone companies. Thursday's vote by the commission overturns a 2002 decision by the George W. Bush-era FCC that excluded broadband from Title II in a bid to encourage broader deployment.

The section includes hundreds of rules and procedures designed to ensure universal access and fair prices. The FCC on Thursday voted to waive Title II provisions controlling prices and requiring the providers to allow competitors to use their networks. The commission also does not plan to immediately impose fees on monthly broadband bills, as it does on phone bills.

"This is not old-style utility regulation, but a 21st-century set of rules for a 21st-century service," Wheeler said.

But the FCC Republicans warned that, despite the promises from the Democratic regulators, the commission is granting itself the power to review the prices that providers charge customers. The order will also inevitably lead to new Internet fees to fund other FCC programs, they warned.

The new rules give the FCC the authority for the first time to police disputes about congestion on the back end of the Internet. Websites will be able to file complaints with the FCC if they believe providers aren't offering reasonable access to load traffic onto their networks. Netflix, which has had to pay major providers over the past year for direct-connection deals, has said it may file complaints against Comcast, Verizon, and other providers for charging unreasonable rates.

The rules also include a catch-all provision that bars any practices that "unreasonably" interfere with the ability of consumers to access the services of their choice. The commission could use that provision to review how cellular carriers cap their customers' monthly data usage, for example. Providers do have some leeway, however, for "reasonable network management."

The net-neutrality fight exploded last year after a federal court sided with Verizon and struck down the agency's old 2010 rules. Those rules were much more lenient and did not rely on the controversial Title II authority.

—Kaveh Waddell contributed to this article.

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